2024Q1 sales are in line with expectations. Low retail discount orders have improved, maintaining the “buy” rating of 2024Q1, and the low volume of orders on all platforms of Li Ning's big goods, with a low growth of 20-30% online and a decrease in offline orders (direct sales growth orders, wholesale orders falling). The 2024Q1 turnover is in line with expectations. We maintain our profit forecast. We expect net profit to be 33.4/38.4/4.35 billion yuan for 2024-2026, corresponding EPS of 1.3/1.5/1.7 yuan, and PE corresponding to the current stock price is 14.0/12.1/10.7 times. It is expected that the introduction of new mass products and the downturn of e-commerce products will drive demand in the low-tier market. Furthermore, discounts are expected to improve further and maintain the “buy” rating.
Li Ning's large goods performed well online. Driven by Ole, direct sales were better than wholesale, and new product discounts were good Li Ning (excluding Li Ning YOUNG): 2024Q1 sales volume was low, and orders increased, and same-store sales recorded a decline in orders.
By channel: (1) E-commerce: E-commerce traffic and same-store sales grew by 20-30%. Driven by new platforms such as Dewoo/Douyin, Dewoo/Douyin/JDong/Tmall/official website/Vipshop/Pinduoduo sales share is expected to be high shuang/high shuang/double digits/ 30% high band/ middle order/middle order/low order. (2) Offline: The decline in low offline sales orders, the increase in orders in direct sales (lower orders in the same store), the decline in orders in wholesale sales (lower orders in the same store). Direct sales are mainly driven by Ole channels. Direct sales are mainly driven by Ole channels. Direct sales and same-store growth converge with wholesale, mainly due to the influence of a high customer flow base; wholesale same-store sales are mainly due to channel rectification, temporary sales, etc. are not included in the statistics. In terms of new products: 10% off + on new products. Among them, the Red Rabbit 7pro has increased by nearly 50% since the beginning of the year, and the running shoes/fitness category has increased by 20% +/ double digits. It is expected that with the expansion of the running/basketball product line, popular products will be launched in 2024Q2, and Wade's Way 11 is expected to go on sale in May. Children's clothing: The number of units in 2024Q1 turnover is increasing, and store efficiency is expected to remain basically the same.
Both online and offline discounts for Li Ning's bulk goods improved with low orders; inventory sales ratio and warehousing structure health discount improved with lower orders year over year; wholesale and direct warehouse sales ratio were both positive: 2024Q1 online and offline discounts all improved with lower orders year over year, offline comprehensive discounts were 40% higher (2023Q1 30% off middle), and direct channel discounts improved the number of units compared to year. The inventory sales ratio and structure are still at a healthy level. The 2024Q1 omni-channel inventory ratio is 4-4.5, the wholesale inventory sales ratio is better than direct management, and the storage age structure is basically the same year over year, with new products within 6M accounting for 80%.
2024Q1 Li Ning's major goods and Li Ning children's clothing stores closed 26/23, maintaining net opening expectations throughout the year Li Ning (excluding Li Ning YOUNG): As of 2024Q1, there were 6214 stores, 26 net closed compared to the end of 2023, including +1/wholesale-27, a net increase of 8 over the previous year. Li Ning YOUNG: As of 2024Q1, there were 1,405 stores, a net increase of 152 compared to 23 stores closed at the end of 2023. The channel is expected to remain fully open in 2024, including 20 direct sales outlets, 100 wholesale stores, and 150 children's clothing stores.
Risk warning: Market competition intensifies, product upgrades and channel optimization fall short of expectations.